FIN 325 MOD 5 QA 17

NPV and IRR analysis of projects Thomas Company is considering two mutually exclusive projects. The firm, which has a cost of capital of 14%, has estimated its cash flows as shown in the following table:. (1)

a. Calculate the NPV of each project, and assess its acceptability.

a. The NPV of project A is $_________. (Round to the nearest cent.)

According to the NPV method, is project A acceptable? (Select the best answer below.)

YES ________

NO_________

The NPV of project B is $__________. (Round to the nearest cent.)

Is project B acceptable on this basis of NPV? (Select the best answer below.)

YES_________

No__________

1: Date Table

___________________________________________________

Initial investment Project A Project B

(CF=0) $130,000 $104,000

YEAR (t) Cash inflows (CF {t})

1 $25,000 $40,000

2 $25,000 $45,000

3 $30,000 $25,000

4 $60,000 $20,000

5 $60,000 $25,000